Political parties and pundits are fiercely debating the economic benefits of President Trump’s landmark tax bill, recently rebranded the Working Families Tax Cut. That’s to be expected with upcoming mid-term elections and in an economy as complex and challenging as ours.
Tariffs aside, the Administration and Congress has moved with commendable speed to implement proven pro-growth policies of lower taxes, balanced regulation and a smaller burden of government on job creators large and small.
Lost in the current debate is recognition that the most powerful benefit of tax policy is not in the quick fix to an uncertain economy, but the foundation it lays for America’s long-term prosperity and economic success.
Yes, good tax policy has immediate impact. We saw that in 2017 following passage of President Trump’s Tax Cuts & Jobs Act that reversed a decade of slow economic growth, stagnant paychecks and U.S. firms being chased overseas due to the burden of the least competitive tax code among advanced nations. Within the first three years America enjoyed record real-wage growth, an immediate 1 percent rise in GDP along with significantly higher investment, research and manufacturing in the U.S.
But the true benefit of the new tax code followed: A much more resilient, innovative and competitive economy that powered through the unprecedented pandemic shut-down, quickly recovered lost jobs, rebuilt supply chains and weathered devastating inflation caused by irresponsible federal spending.
This year Republicans in Congress beat all expectations by quickly delivering to the President tax policy that locked in the pro-growth provisions of the TCJA, fully restored incentives for innovation and investment in the U.S. and made thoughtful improvements in international taxes to ensure American businesses can continue to compete and win in the global marketplace.
Both for the short and the long-term, the OBBB is proving to be a success: It’s already spurring investment, keeping jobs in the United States and positioning America to lead in innovation and exports for decades to come.
The bill was designed to ensure America continues to be the best place in the world to build and invest. We’re seeing businesses of all size acting on the new incentives built into the law to expand their operations in the United States and hiring American workers.
Consider research and development, the lifeblood of our innovation economy.
The new law restores immediate expensing for U.S. R&D. Already this portion of the law is bearing fruit. Since the law’s signing, multiple startups announced plans to hire staff in the U.S. instead of abroad. Staffing firms report a 15 to 20 percent jump in demand for U.S. data science and AI roles since July. And job postings for R&D positions surged on ZipRecruiter, reaching two-thirds of last year’s quarterly total in just five weeks. These are important developments that will keep high-value innovation jobs in America.
Manufacturers, too, are benefiting. The law allows businesses to immediately deduct the cost of building new manufacturing facilities and strengthens credits for domestic semiconductor production. Many industry leaders rightly applauded this as crucial to reshoring supply chains and securing America’s industrial base.
Companies selling “Made in America” good and services around the world are discovering new reasons to expand here at home. The law overhauled how export-related income is taxed, broadening and making permanent a key TCJA deduction. Now, not only do long-time users of the provision stand to see larger benefits, but many capital-intensive manufacturers that had been excluded now qualify for the benefit. The result is a stronger incentive to locate production, intellectual property and profits in the United States.
As reported recently in the Wall Street Journal, the law “will make the U.S. more competitive in artificial intelligence and accelerate investments because it is more attractive to spend on network architecture”, said one CFO, allowing America “to lead in the most consequential technological revolution of our time.”
Main Street businesses are also responding positively to the permanency of the 20 percent tax deduction for pass-throughs, with small business optimism returning for business conditions and expansion.
These are all encouraging signs that should be welcomed by both political parties. And while immediate attention focuses on the benefits of low taxes on families and new tax cuts for individual workers and seniors, Congress’s commitment to ensuring America’s economic growth, innovation and competitiveness over the long-term are the most consequential benefits of the bill.
